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Following beliefs or excluding the worst? The role of unfindable state in learning

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  • Mayskaya, Tatiana

Abstract

An agent learns in continuous time from two information sources, each associated with a hypothesis. If a hypothesis is true, the associated source confirms it at a positive rate. False hypotheses are never confirmed. Among the two hypotheses, either exactly one is true or both are false. The agent’s optimal learning strategy has two phases. During the first phase, the agent follows his beliefs; that is, at each moment, he learns from the source associated with the most likely hypothesis according to his current beliefs. During the second phase, he focuses on excluding the least likely but more important hypothesis.

Suggested Citation

  • Mayskaya, Tatiana, 2024. "Following beliefs or excluding the worst? The role of unfindable state in learning," European Economic Review, Elsevier, vol. 162(C).
    • Handle: RePEc:eee:eecrev:v:162:y:2024:i:c:s0014292123002817
    DOI: 10.1016/j.euroecorev.2023.104653
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    More about this item

    Keywords

    Dynamic information acquisition; Poisson process; Limited attention; Search;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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